Why FS Investment's 9% Dividend Yield Is Worth the Wait

An investor would have to own five S&P 500 stocks to come close to the dividend yield paid out by FS Investment.

Correction -- This article has been updated from 7:20 a.m. ET to correct FS Investment's ticker.

Investors who are looking for a relatively unknown stock with potential for long-term gains and pays a strong dividend should consider FS Investment (FSIC) , which will trade ex-dividend Friday, Dec. 18. That's the last day management of the company will finalize its roster of shareholders to whom it will mail cash payments. And despite missing its third-quarter earnings last month, sending its shares down more than 1%, there are tons of reason to be optimistic about the company's growth potential.

At around $9.36 a share, FSIC stock has declined some 5.75% in 2015, while falling some 8% in the past 12 months. But now's the time to play its potential turnaround. Not only is FSIC stock underpriced at a P/E of 13, compared to a P/E of 21 for the S&P 500 (SPX) index, the company pays a solid 22.25-cent quarterly dividend that yields a stout 9.21% annually -- almost five times the 2.00% yield paid out by S&P 500 stocks.

And consider, the Philadelphia-based company has raised its dividend by about 200% just in the past year, from 0.07 cents a share. This means, one would have to own five S&P 500 stocks to come close to FSIC's 9.21% dividend yield. It will make its 22.25-cent quarterly dividend payment on Tuesday, Jan. 5, 2016 to shareholders of record as of Tuesday, Dec. 22 -- three days before Christmas.